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Tsang: The worst is over
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October 8, 1998: 9:31 p.m. ET
But Hong Kong's financial secretary says Japan is "key issue" in Asian recovery
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NEW YORK (CNNfn) - Hong Kong's most senior financial official said Thursday he was optimistic the region's economies had finally bottomed out and would shortly stage a comeback, though Japan's actions will prove pivotal.
"The whole Asian region, from Japan right on down to Singapore, has been devastated one way or another so we cannot just go further down -- the only way we could go is up," Sir Donald Tsang, Hong Kong's financial secretary, told CNN's "Moneyline News Hour with Lou Dobbs."
Tsang, who earlier in the week attended the annual meeting of the International Monetary Fund and World Bank in Washington with central bankers and top economic officials from around the world, said he had begun to see "very good signs" in Korea and Thailand of a modest economic recovery.
The sudden plunge of the Thai national currency, the baht, in the summer of 1997 is widely viewed as the catalyst behind the Asian crisis.
Tsang said he arrived in Washington concerned about festering financial problems in Brazil and Japan and the unsettled situation in emerging and developing markets across the globe.
"After the meeting, I was a lot more reassured," he said. "Of course, we are not out of the woods completely, (but) at least we now have new determination about how to deal with Brazil."
Tsang added that the question of "how we deal with capital flows" remained paramount.
Yet even as he seemed sanguine about Asia's short-term prospects, Tsang asserted the fate of the region's recovery will hinge, at least in the short term, on Japan's resolve in putting its own financial house in order.
"Japan is the key issue," he asserted. "It is providing liquidity for most of the economies in the region while its partners … are buying Japanese products in exchange. But that deal, that standing arrangement, has now shifted, with Japan not seizing (the initiative) to provide the liquidity.
"We hope there is a resolution of the banking crisis there. It will then unlock the situation, then liquidity will return to the region."
Over the summer, Tsang played a prominent role as the point-man behind Hong Kong's multi-billion-dollar intervention in local markets to shore up equities against speculators. Critics assailed the intervention -- during which the Hong Kong government pumped an estimated $8 billion into the market -- as a dangerous departure from precedent that could undermine the integrity of Hong Kong's free market system.
Tsang has defended the action as necessary to fend off a further plunge in the Hang Seng index, which has skidded 26 percent this year.
On "Moneyline," Tsang insisted that Hong Kong's economic flexibility and adaptability would enable it to weather the current distress.
"We are a very externally oriented economy," he said. "Therefore we swim, we sink, we are going to rise together, along with the rest of the world market."
He added: "I am generally optimistic because we are an efficient economy, so when an adjustment is required, we adjust pretty quickly."
Tsang also praised China as a "huge market" with which Hong Kong has "very strong ties." China reacquired Hong Kong in last year's "handover" after 156 years of British colonial rule over the territory.
"They are doing some strenuous work, and they're doing good work in their market," he said. "The structure is now being put in place and they are bearing up to the adjustment that is taking place."
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